“Skyrocketing healthcare costs” during the pandemic inspire academic workers to organize

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A faculty petition at The New School in New York denouncing “skyrocketing healthcare costs” during the pandemic has attracted the support of more than 600 signatories, reflecting the growing calls among workers, particularly academics, to increase transparency of the price self-insured employers pay for healthcare.

“Did self-insured employers make money? The short answer is yes, in the same way that health plans made a ton of money because of all the deferred care,” said Adam Block, a New York-based health economist and former CMS regulator.

More than half of all Americans receive healthcare from their employer, and the majority of businesses are self-insured, meaning that companies pay for their employees’ medical expenses. Over the past decade, the average annual premium employers paid for a family of four’s health benefits rose nearly 62% to $25,574 in 2020, according to the Kaiser Family Foundation. Employee health benefits consume more than $15 million annually per 1,000 workers. But in 2020, something historic happened: employers’ healthcare costs went down, as patients avoided the doctor’s office during the pandemic. One actuarial firm estimated that self-insured employers experienced a 4% year-over-year reduction in worker healthcare costs.

“There’s going to be some pent-up demand, but it does not make up for the amount that [insurers] earned in Q2, when basically nobody was going to the doctor, except to be hospitalized for COVID,” Block said. “Health plans had net profitability in 2020 that was better than in most other years and self-insured employers would be the same.”

According to a petition by The New School’s part-time faculty union, the university announced in October that part-time faculty’s health coverage would switch from UnitedHealthcare to an Aetna plan that includes an increased premium and a 10% co-insurance fee on multiple services, representing “an extraordinary cost burden in the midst of a global pandemic.” As healthcare costs rise, the university has frozen part-time faculty’s salary, retirement contributions and canceled many of their courses, “limiting our ability to cover these escalating costs.” The benefits change, which was effective January 1, also comes as those with chronic conditions are forced to “navigate the system while fighting serious illness or caring for sick loved ones.”

The union, ACT-UAW 7902, did not respond to interview requests.

“We must continue to organize to reduce our skyrocketing healthcare costs,” the petition said.

For its part, The New School said 80% of its 2,040 faculty members are employed part-time and “are a vital part of the university community.” The university said it had experienced double-digit annual increases in healthcare costs recently, although it did not disclose the exact period of time. A spokesperson said the university pays 90 cents on every dollar of healthcare premiums.

“We’re proud to be one of the few institutions that provides access to comprehensive health insurance for part-time instructors,” the university said in a statement.

Faculty at The New School aren’t the only ones calling for a cut to their healthcare costs.

Last week, thousands of graduate student workers at Columbia University went on strike, demanding, in part, “healthcare improvements that create a sustainable work environment for all.” In November 2020, a representative from Stanford University’s faculty union wrote an editorial wondering why premiums for the school’s health plan increased by 20% year-over-year when healthcare utilization decreased.

“In light of a pandemic that is seeing a devastating resurgence and plunging medical usage across the country, why will Stanford’s healthcare premiums take such a large jump for faculty, staff and retirees in 2021?” Richard Patrone, executive board secretary at SEIU Local 2007, wrote.

Although insurers and employers are operating under the assumption that there will be pent-up demand for healthcare services in 2021, these groups likely spent less on healthcare last year than was budgeted, and “in all likelihood, we’re being asked to contribute more this year and we’re taking more benefit cuts this year, even though the plan is going to spend less this year,” said Glenn Melnick, a health care finance professor at the University of Southern California.

While the ACA mandates that fully-insured plans disclose their healthcare spend—in the form of minimum-loss-ratios—and return excessive profits to members, no such requirements exist in the self-insured employer space, Melnick said, making it impossible to know what portion of employees premium dollars are spent on medical care. In some instances, Melnick believes companies profited from the lack of healthcare use during the pandemic.

He called for Congress to amend ERISA and require employers to disclose what they spend on healthcare services. If cost savings exist, he believes that employees should be awarded a rebate—just like those under fully-insured plans receive.

“We’ve got to get the word out and illuminate these black holes,” Melnick said. “By making this transparent, it’ll raise the consciousness of all Americans to say, ‘Hey, wait a second, this is not really my employer’s money, this is my money. And we’re not really spending a very efficiently.”

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